The Supreme Court recently heard oral arguments in Alice Corp. v. CLS Bank Int’l, a case with the potential to determine whether, or when, computer-implemented inventions (i.e., software) are patent-eligible subject matter. Many commentators hope the Court will use this case as an opportunity to clarify what makes an invention an “abstract idea” that is ineligible for patenting. The en banc Federal Circuit ruled that the method at issue was not eligible for a patent, but a majority could not agree on a standard for this decision. CLS Bank Int’l v. Alice Corp., 717 F.3d 1269 (Fed. Cir. 2013).

In the course of the arguments, Justice Breyer identified a “Scylla and Charybdis” the Court will have to navigate: if it is too easy to obtain a patent that simply claims “tak[ing] an idea that’s abstract and implement[ing] it on a computer,” there is a risk that “instead of having competition on price, service and better production methods, we’ll have competition on who has the best patent lawyer.” Transcript of Oral Argument at 16. On the other hand, if the bar for patent eligibility is set too high, “you rule out real inventions with computers.” Id. Commentators, like Adam Liptak of the New York Times, agree that the Supreme Court will likely rule for CLS Bank International (“CLS”) but narrowly, thus avoiding the potential invalidation of the majority of software patents and the approach urged by Solicitor General Donald B. Verrilli. Id. at 44–45.

The patents in question, owned by Alice Corp. (“Alice”), are for a method of settling multi-party financial transactions — essentially, a computerized escrow system. CLS Bank Int’l, 717 F.3d at 1274. Section 101 of the Patent Act outlines what kinds of inventions are patentable: “any new and useful process, machine, manufacture, or composition of matter . . . .” 35 U.S.C. § 101. However, the Court has held that an abstract idea cannot be patented, nor can an abstract idea be made patentable merely by attempting to limit the use of the abstract idea to a “particular technological environment.” Diamond v. Diehr, 450 U.S. 175, 191 (1981). Because the abstract idea exception is malleable, uncertainty about exactly how broadly a computer-implemented invention may be claimed while still being patent-eligible has plagued the software industry.

So far, the Supreme Court has been reluctant to provide clarity on the scope of the abstract idea exception. In 2010, the Court ruled that a method of hedging risks was an abstract idea and therefore not eligible for a patent. Bilski v. Kappos, 130 S. Ct. 3218, 3222 (2010). But the Court did not further define what qualifies as a patent-eligible process. In 2012, the Court held a diagnostic patent invalid because adding conventional steps to an abstract idea does not render it patent-eligible. Mayo Collaborative Services v. Prometheus Laboratories, Inc., 132 S. Ct. 1289, 1298 (2012).

Mark Perry, arguing for CLS, asserted that the combination of Bilski and Mayo makes Alice’s method ineligible. Transcript of Oral Argument at 26–27. However, the Justices seemed to be seeking a more specific way to draw the line between an abstract idea and a patent-eligible computer-implemented invention. Over the course of his argument, Perry was asked to clarify this line by five Justices. Id. at 28–29, 29–30, 33–34, 39, 42. If the Court is able to devise a workable rule governing the patent eligibility of software patents and what makes an idea abstract, this case would be an important bookend to the line of cases struggling with this question.

Notably, even if the claimed invention were found to be patent-eligible subject matter, it would almost certainly go on to be invalidated on the grounds of being overbroad or obvious. Many commentators, like Michael Borella on Patent Docs, would prefer to limit the scope of software patents with these secondary inquiries rather than through threshold Section 101 inquiry. But since the only issue currently on appeal is subject matter eligibility, the court did not consider the other requirements for patentability.